The order of the Bench was delivered by
Dr. O. K. Narayanan, Vice-President-This appeal is filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order of Commissioner of Income Tax (Appeals)-V at Chennai, dated 19.6.2013. The appeal arises out of the order passed under Section 154 of the Income-tax Act, 1961.
2. The assessee in this case has filed the return of income on a total income of Rs. 5,27,891/-. The return reflected a refund claim for Rs. 63,84,256/-. This refund is made up of excess advance tax as well as TDS.
3. The return was processed under Section 143(1) and the intimation was communicated with demand of Rs. 76,920/-. As against the refund claimed by the assessee, the processing of return resulted in a further demand of Rs. 76,920/-. According to assessee, this was not proper. A petition for rectification under Section 154 was filed. The assessee claimed in the petition that credit must be given to a sum of Rs. 64,41,799/- comprising of advance tax payments and TDS.
4. In the order passed by the Assessing Officer on the said petition filed by the assessee under Section 154, it was held that the assessee was not entitled for the claim of exemption made by her under Section 54F of the Income-tax Act, 1961. The assessee had sold a property in Chennai and investment was made in a residential property in United States of America. It was on that basis, the assessee has claimed exemption under Section 54F. Assessing Officer held that investment made outside India cannot be considered for the purpose of exemption and as such, no exemption could be given under Section 54F and therefore, the addition was made while processing of return of income in accordance with law. The petition under Section 154 was dismissed.
5. In first appeal, the Commissioner of Income Tax (Appeals) held that the capital gain arose in the hands of the assessee is taxable in India and therefore, the computation made by the Assessing Officer was correct and no rectification was called for in the intimation issued under Section 143(1)(a). He also found that the order does not enhance the assessment or reduce the refund or otherwise increase the liability of assessee and therefore, Section 154(3) is also not applicable. He accordingly confirmed the order of the Assessing Officer.
6. It is against the above that the assessee has come in appeal before us. The grounds raised by the assessee in the present appeal are accordingly read as below:-
"(2) The Commissioner of Income Tax (Appeals) erred in confirming the rectification order passed by the assessing officer.
(3) The Commissioner of Income Tax (Appeals) erred in holding that assessee's petition for rectification u/s. 154 has become infructuous as there is no necessity of amending the said intimation u/s. 143(1) with a view to rectify any mistake apparent from record.
(4) The Commissioner of Income Tax (Appeals) ought to have appreciated that while processing the return u/s. 143(1), assessing officer omitted to give credit for advance tax and tax deducted at source aggregating to Rs. 64,41,799/-, hence a petition u/s. 154 was filed to give credit for the above sum and grant refund with.
(5) The Commissioner of Income Tax (Appeals) ought to have appreciated that the assessing officer while passing the order u/s. 154 has withdrawn the claim of exemption u/s. 54F on his own motion and which was not the subject matter of rectification.
(6) The Commissioner of Income Tax (Appeals) ought to have appreciated that the assessing officer having admitted that intimation u/s. 143(1) requires no rectification, had erred in withdrawing exemption claimed u/s. 54F on the ground that that investment in house property in USA is not eligible for exemption u/s. 54F of the Act.
(7) The Commissioner of Income Tax (Appeals) ought to have appreciated that withdrawal of exemption u/s. 54F in respect of investment in a house property in USA is a debatable one and cannot be subject matter of rectification u/s. 154 in proceedings u/s. 143(1) of the Act.
(8) The Commissioner of Income Tax (Appeals) ought to have appreciated that assessee has fulfilled all the conditions laid out in sec.54F of the Act and hence exemption has to be allowed.
(9) The Commissioner of Income Tax (Appeals) erred in not following the Tribunal decisions wherein it was held that assessee cannot be denied exemption u/s 54F merely on the ground that the purchase/construction of the residential house must be in India and not outside India if all other conditions laid down in the section are satisfied.
(i) Mrs. Prema P. Shah & Sanjiv P. Shah vs. ITO 282 ITR (AT) 211 (Mumbai).
(ii) Vinay Mishra v. ACIT (2012) 20 ITR (Trib) 129 (Bangalore)"
7. We heard Shri R. Vijayaraghavan, the learned counsel appearing for the assessee and Shri Guru Bhashyam, the learned Joint Commissioner of Income Tax, appearing for the Revenue.
8. The provision of law contained in Section 143(1)(a) provides that the return filed shall be processed to compute the total income or loss of the assessee, after making adjustments for any arithmetical error in the return or incorrect claim, if such incorrect claim is so apparent from any information in the return. Any payment of additional tax or payment of refund or any other adjustment shall follow the computation of income in the above manner. Therefore, it is clear that what is possible to adjust is only any arithmetical mistake or any incorrect claim patent on the face of the return. In the present case, there was no question of any arithmetical error. Assessing Officer held that the capital gain was not exempt from levy of tax. Whether the capital gain arose in the hands of the assessee is exempted or not in the light of the residential house purchased in United States of America, is not a question in the nature of mistake apparent from records. It is not possible to say prima facie that the claim made by the assessee is incorrect. It is a highly debatable issue. The relevance of law has to be deeply studied. Therefore, we are of the considered view that the Assessing Officer has overstepped his authority to deny the exemption claim of the assessee made under Section 54F in the present case, beyond the jurisdiction of Section 143(1)(a). Accordingly, the order of Commissioner of Income Tax (Appeals) is also not sustainable in law.
9. Therefore, we set aside the orders of lower authorities and direct the Assessing Officer to pass a fresh order on the petition filed by the assessee under Section 154 on the subject matter raised in the said petition. If any refund is due, based on the said order, the same shall be paid over to the assessee.
10. The question whether the exemption claimed by the assessee under Section 54F is a serious question to be considered by the Assessing Officer. Assessee has sold the property in India. The investment has been made in United States of America. Whether the exemption is available against property acquired in a foreign country, is a serious question of law to be considered in the light of Section 54F, especially in the light of sub-section (4) of that Section. Sub-section (4) of Section 54F provides an impression that the consideration received on sale of the property must be utilized for acquiring a new asset. Therefore, the question is whether the assessee has purchased the American property by transferring the consideration received in India in foreign exchange or the American property was acquired by her by independent funds available in United States of America. All these matters have to be discussed and sorted out.
11. Therefore, we cannot just ignore the anxiety of the Assessing Officer in the matter of exemption under Section 54F. But, the only thing is that such an enquiry is not possible on the petition filed by the assessee under Section 154.
12. Therefore, in the interest of justice, we feel that the assessing authority may, if he thinks it proper, initiate proceedings permissible under law to bring the question of exemption under Section 54F for scrutiny. If the Assessing Officer initiates such proceedings, he can consider the issue and come to a decision in accordance with law.
13. In the result, this appeal filed by the assessee is allowed.
The order pronounced in the open court on 22nd of October, 2013.